Federal Estate Tax in 2010: What’s Happening?

[Updated January 22, 2010] For your reference, here’s a look at how lawyers and law firms on JD Supra are making sense of the 2010 repeal of the Federal Estate Tax. For more information on why the estate tax was repealed, and the myriad of consequences, start with these articles:

2010 Federal Estate Tax: Estate Law Updates on JD Supra

Estate Tax Repeal is Here – by Cole Schotz:

To the surprise of most estate planning practitioners, the arrival of
January 1, 2010 brought with it a federal estate tax repeal. Congress
was unable to compromise prior to year end on legislation that would
have either maintained the status quo ($3.5 million applicable
exclusion amount and a 45% estate tax rate) or implemented new
exclusion amounts and/or tax rates. As a result, the following rules
apply in 2010…

2010 Federal Estate Tax Repeal – What Does It Really Mean? – by Partridge Snow & Hahn LLP:

The
2010 federal estate tax repeal has been nine years in the making, yet
we can honestly say that no one saw it coming. Congress did not act,
and we now find ourselves in a system created by what some commentators
are calling “congressional malpractice” and what the Senate Finance
Committee Chairman describes as “massive, massive confusion.” Here is
the bottom line of how the estate tax landscape has changed and what to
look out for over the next 12 months…

Estate Tax Uncertainty in 2010 – by McAfee & Taft:

The
future of the federal estate tax laws remains uncertain. Many planners
believe it is likely that legislation, when it is passed, will result
in a return to something akin to the 2009 rules, which provided for a
$3.5 million per person federal estate and GST tax exemption and a tax
rate of 45%…

Estate and Gift Tax Update – Changes in 2010 and Beyond – by Edwards Angell Palmer & Dodge LLP:

“No
matter what Congress does or does not do, many estate plans allocate
assets among trusts or beneficiaries through the use of formulas that
assume the existence of a federal estate tax. Plans prepared in the
last several years may have anticipated the 2010 temporary repeal…”

Would Retroactive Reinstatement of the Federal Estate Tax be Constitutional? – by Randy Spiro:

The
perfect storm for estate planning arrived on January 1, 2010 when the
federal estate tax was repealed, but only for persons dying on and
after January 1, 2010 but no later than December 31, 2010. Adding to
the mystery is Senate Finance Committee Chairman Max Baucus’ pledge
that the Senate will pass a bill reinstating the tax, which legislation
the House of Representatives previously passed on December 3, 2009. But
would a retroactive reinstatement pass constitutional muster for
persons dying on and after January 1, 2010 and before the date of the
bill’s passage and signing by the President?

The Stealth Estate Tax of 2010 – by Kaufman Law Group:

“In
2001, Congress revised the federal estate tax schedule, gradually
increasing the individual exemption from estate tax from year to year.
Pursuant to this legislation, the exemption was raised to $3.5 million
per person ($7 M per couple) in 2009, and there is a scheduled one-year
exemption from all federal estate tax for 2010. But not many people
realize that this one-year “gift” is really a Trojan tax horse! ” (Also from Kaufman Law Group: Avoiding the Stealth Estate Tax)

Is the Estate Tax Dead or Only Sleeping? – by Jeffrey Crown:

“For
the present, there is no Federal estate tax. But there are two reasons
not to celebrate yet. First, the estate tax is being replaced by a
moratorium on “stepped up basis at death.” Secondly, there is a
possibility that Congress may reinstate the tax retroactively…”

Uncertainty On Existing Estate Plans And Gifting Strategies Due To Repeal Of The Federal Estate Tax – by Fox Rothschild:

“In
the context of Federal Estate Tax repeal, some wills use technical
language that may have the effect of reducing the surviving spouse’s
actual share of the decedent’s estate to zero.This result may be
completely unintended…”

Temporary Tax Repeals May Alter Your Estate Plan – by Dinsmore & Shohl LLP:

“Estate
tax changes next year could include elimination or significant
restriction of wealth-shifting opportunities currently available,
including restrictions on valuation discounts and on the use of Grantor
Retained Annuity Trusts (GRATs). While current law applies, and values
and interest rates remain low, planning opportunities are available…”

Tax Law Change May Reinstate Estate Rules – by Sands Anderson Marks & Miller:

Everyone
expects (yes, that crowd of everyone again) Congress will pass a more
permanent extension of the estate tax law setting the tax-free amount
at a higher level, but Congress is full of surprises and, with an
election coming up, Congress could easily do nothing about further
estate taxes (just as happened this year) and let the exemption drop
back to $1,000,000…

The Temporary Repeal Of The Federal Estate Tax And Its Effect On Your Estate Plan – by Morrison & Foerster LLP:

Although some would see this as another cause for celebration, for many
the repeal will create more problems than it solves. In addition, the
repeal of the estate and GST tax laws — even though under current law
it will only last for one year — requires most individuals to consider
whether their wills and trusts still operate as planned or instead
leave their beneficiaries facing unintended consequences…


More information on…
 
JD Supra: Trusts & Estates Law | Tax LawTwitter: Trusts and Estates | Tax AlertsFacebook: Estate Law & Lawyers | Tax Law

Ready to add you own work to the mix? Post it now. Find a larger audience with JD Supra.